Fintech Supervisory Sandbox (FSS): Pilot Conditions for Banks and Tech Firms
The FSS, launched by the HKMA in September 2016, lets banks and their partnering tech firms run fintech pilot trials with limited participating customers.
What the FSS Is and Who Runs It
The Fintech Supervisory Sandbox (FSS) is a Hong Kong Monetary Authority (HKMA) framework. The HKMA launched it in September 2016.
The FSS lets banks and their partnering technology firms (tech firms) conduct pilot trials of their fintech initiatives. Those trials involve a limited number of participating customers. During the pilot, the participants do not need to achieve full compliance with the HKMA’s supervisory requirements.
The sandbox is available to fintech and other technology initiatives intended to be launched in Hong Kong by banks.
Who Can Take Part in a Pilot Trial
The sandbox is open to banks and their partnering tech firms. A project brought into the FSS is expected to be a fintech or other technology initiative that a bank intends to launch in Hong Kong.
The operating logic is a pilot trial: the initiative runs with a limited number of participating customers, and the HKMA’s full supervisory requirements are relaxed for that trial. The sandbox is not open-ended in purpose — it should not be used as a means to bypass applicable supervisory requirements.
The Pilot Trial Function and the FSS 3.0 Funding Route
FSS 2.0 offers the pilot trial function. In addition to that pilot trial function, FSS 3.0 facilitates eligible trial projects of research and development (R&D) to apply for a maximum of HK$1 million in funding support under the Innovation and Technology Commission (ITC)‘s Public Sector Trial Scheme (PSTS).
The funding route therefore sits alongside the pilot trial function rather than replacing it. The HK$1 million ceiling and the PSTS link come from the HKMA’s description of FSS 3.0, and the eligibility gate is that the trial project is an R&D project that qualifies.
What the HKMA Has Not Fixed in Advance
The HKMA has not laid down an exhaustive list of the supervisory requirements that may potentially be relaxed within the FSS environment. That means the set of requirements in play is not published as a closed checklist. What the sandbox does provide is a pilot trial path in which full compliance is not required for the duration of the trial, for banks and their partnering tech firms, with a limited number of participating customers.
For a bank in Hong Kong acting as project sponsor, the FSS 3.1 pilot route sets an explicit qualification condition: a qualifying FSS 3.1 pilot project must have a bank in Hong Kong as its project sponsor. This is stated as a qualifying condition for FSS 3.1 pilot projects.
FAQ
Who can run a pilot trial under the FSS? Banks and their partnering technology firms can conduct pilot trials of their fintech initiatives involving a limited number of participating customers under the FSS. The sandbox is available to fintech and other technology initiatives intended to be launched in Hong Kong by banks.
Does joining the FSS mean a bank can ignore supervisory requirements? No. The FSS should not be used as a means to bypass applicable supervisory requirements. The pilot trial function allows a limited number of participating customers and relief from full compliance during the trial, but the sandbox is not a route around the applicable requirements.
What funding does FSS 3.0 offer R&D trial projects? In addition to the pilot trial function offered by FSS 2.0, FSS 3.0 facilitates eligible trial projects of research and development to apply for a maximum of HK$1 million in funding support under the Innovation and Technology Commission’s Public Sector Trial Scheme.
Is there a published list of requirements that can be relaxed in the FSS? No. The HKMA has not laid down an exhaustive list of the supervisory requirements that may potentially be relaxed within the FSS environment.
What qualification condition applies to FSS 3.1 pilot projects? A qualifying FSS 3.1 pilot project must have a bank in Hong Kong as its project sponsor.